Buy-side Equity Research Support to a US-based asset manager
About Client:
A US-based asset manager with 20+ years of experience in the global capital markets reached out to ValueAdd for equity research and valuation model support. With Assets under Management of over USD 900mn, the firm offers portfolio management services to corporates and select very high net worth individuals as well as other financial intermediaries/institutions.
The firm runs an opportunistic equity long/short fund focused on the US equities with targets to generate hurdle rates of more than 20% annual net returns, less than .15 correlation to the S&P 500 and average positive returns in Index down months.
The Client team has a proven track record of alpha generation through the cycles of dot.com bust and financial crisis and combines years of investment wisdom in managing fundamental long/short equity strategies. The fund managers have consistently beaten the benchmarks and generated over US$300 million in alpha with positive returns in each year the S&P 500 was negative. The fund achieves its unique performance profile through a well-defined investment process constructed of proprietary alpha generation methods.
Business Problem:
The Client needed a dedicated equity research coverage support to enhance their research bandwidth to focus on idea generation and alpha creation. The Client was looking for a cost-effective and reliable outsourced research partner with a proven track record in US equity markets across multiple sectors.
The objective was to build new valuation models for 100+ stocks across multiple sectors such as technology, energy, utilities and metals & mining.
ValueAdd Solution:
- ValueAdd offered a comprehensive coverage expansion support for the Client through a dedicated team of equity research analysts to chase new investment opportunities
- ValueAdd team could easily adapt to the rigorous requirements, in-depth fundamental research and detailed financial modelling of companies
- ValueAdd’s equity research team smoothly transitioned some of the existing coverage (valuation models, earnings templates etc) from the client analysts for regular maintenance
- Initiated equity valuation models for new ~100 US stocks, across energy, utilities, metals and mining sectors.
- ValueAdd team developed quarterly earnings templates and models along with key assumptions and notes updates for earnings, corporate actions, and news releases
- Attend earnings calls and read transcripts to deliver earnings call summary and updated the investment recommendations as required.
- The quarterly earnings updates included quarterly results analyses, model updates of key company drivers, street consensus estimates along with management guidance and commentary.
- ValueAdd team further supported in stock screening, peer analysis, primary issuance research, and quarterly sector updates
Benefits Delivered:
- Client could accelerate their equity coverage of investment universe to 100+ companies within a year
- High quality research support with investment recommendations offered value for money and saved huge fixed cost and admin hassles of hiring, mentoring, training in house research team
- Optimal Inhouse and outsourced team mix facilitated relatively quicker turnaround time than Do-It- Yourself option
- With ValueAdd’s working overnight of the US, Client enjoyed 24/5 operations benefit due to time zone difference
Overall, the engagement with ValueAdd helped the client release significant management bandwidth and helped to focus on active portfolio management while chasing new investment opportunities.